Tax Type
Retail Sales and Use Tax
Description
Media advertising exemption
Topic
Exemptions
Date Issued
08-26-1987
August 26, 1987
Re: Ruling Request/ Sales and Use Tax
Dear ********************
This has reference to a conversation you had with a member of my staff on August 13, 1987 concerning the applicability of the new sales and use tax exemption for "media" advertising to (taxpayer), your marketing and visual communications business.
Based on the new exemption found in §58.1-608(57) and §58.1-602(23) of the Virginia Code, and §630-10-3 of the Virginia Retail Sales and Use Tax Regulations, copy enclosed, whenever the taxpayer provides concept, writing, graphic design, mechanical art, photography, or production supervision for use in "media" advertising, as defined in the regulation, it is providing a professional service, the total charge for which is nontaxable. Therefore, the total charge by the taxpayer to its clients for the provision of any of such items, for use in media advertising is not subject to the tax, whether or not such charge includes the charge for one or more items of tangible personal property conveyed to its client.
It should be noted further that the term "media" for purposes of the exemption has been defined very broadly in the department's regulation, as well as in numerous recent rulings, to include almost anything created by an advertising business for its client for dissemination to the general public. For example, the total charge by an advertising agency for the development of an annual report, has been deemed to be the charge for exempt media advertising. In addition, charges for the development of a logo to be affixed to a company's letterhead, business reply cards, promotional materials, etc., has been determined to be the charge for exempt media advertising.
In addition, when the taxpayer contracts to provide professional services to another advertising agency, for use by the other agency in media advertising, the total charge by the taxpayer for such services will be nontaxable, provided that it also receives and retains a copy of a properly completed certificate of exemption (Form ST-10A), copy enclosed, from the other agency which states that the purchase is intended for placement in the media.
However, based on the last sentence of §58.1-602(23) of the Code, all of the taxpayer's purchases of tangible materials and supplies for use in providing professional media advertising services are subject to the tax, and may not be purchased pursuant to resale certificate of exemption. Examples of material and supply purchases on which the taxpayer must pay the tax include those items stated in subsection 2(B) of the enclosed regulation.
On those rare occasions when the taxpayer provides concept, writing, graphic design, mechanical art, etc., to its client for use in non-media related advertising, the total charge for the provision of these items will be taxable. In these limited circumstances, the taxpayer may purchase exempt of the tax, pursuant to properly completed resale certificate of exemption, (Form ST-10), copy enclosed, any items which it knows at the time of purchase will be resold to its client subject to the tax in the form of the non-media advertising.
When making bulk purchases of supplies, some of which will be used in media related projects and others which will be used in non-media projects, the taxpayer may purchase all of such supplies exempt of the tax for resale, pursuant to properly completed certificate of exemption (Form ST-10), a copy of which is also enclosed. However, whenever any of such untaxed supply purchases are subsequently used and consumed by the taxpayer in providing nontaxable media advertising services, the taxpayer would be required to remit the use tax directly to the department, based on the cost price of such items at the time of purchase.
I hope that the foregoing has responded to your questions, but let me know if you have any further questions.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner